Kenya’s biggest bank by assets, KCB, #ticker:KCB has set the pace in executive pay reporting with a comprehensive account of its directors’ remuneration, making it the first bank to comply with the new reporting demands.
KCB says in its financial report for the year ended December 2017 that it paid its chief executive, Joshua Oigara, Sh256 million, placing him among the best paid executives in Kenya and giving shareholders the very first insight into the nature of compensation at the top of the business.
Mr Oigara’s Sh256 million compensation for 2017 means his pay rose 14 per cent from Sh224 million in 2016, the bulk of it in bonuses.
Mr Oigara said the compensation is in line with the bank’s policy that ties pay to performance.
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The bonuses are, for instance, tied to achievement of multiple metrics, including profitability of the group and at all times reflect the bank’s performance in a year, he said.
KCB says its executive pay is the sum total of many factors starting from the market average obtained through a regional survey of executive compensation all the way to bonuses that are linked to a range of metrics such as return on equity.
“We (KCB), together with Equity Group #ticker:EQTY and an Egyptian bank, have one of the highest RoE (return on equity) on the continent,” Mr Oigara said, even as he pointed out that remuneration of bank executives in East Africa remains way below those of their peers in West and Southern Africa.
Mr Oigara reckons KCB’s performance should be measured against other multinational banks with which it competes for international investors.
The Financial Times places KCB in a peer group of seven banks, including Kenya’s Equity, Co-operative Bank, Oman’s Bank Dhofar, Qatar’s Ahli Bank QSC, Qatar International Islamic Bank QPSC and Morocco’s Marocaine pour le Commerce et l’Industrie Banque SA.
Of the seven, KCB had the highest net income growth rate over the past five years at 10.06 per cent, followed by Equity (9.33 per cent), Co-op (8.11 per cent) and Ahli Bank QSC (6.58 per cent).
In the local market, KCB reported the largest net income of Sh19.7 billion in the year ended December, followed by Equity (Sh18.8 billion) and Co-op (Sh11.4 billion).
Equity however leads with an RoE of 20.2 per cent, enabling it to trade at a high premium on the Nairobi Securities Exchange (NSE) where it leads other banks with a market capitalisation of Sh206 billion.
KCB, whose RoE stands at 18.5 per cent, is second with a market value of Sh165.5 billion.
KCB, however, has the largest absolute cash return of Sh9.1 billion or a dividend of Sh3 per share, followed by Equity’s Sh7.5 billion or Sh2 per share.
Sh1m each day
At the current rate, Mr Oigara’s pay amounts to nearly Sh1 million for each working day and is 72.1 times the average Sh3.5 million paid to KCB’s 5,393 permanent employees.
KCB’s employees are paid a bonus only if they achieve 95 per cent or more in a scorecard of the set targets.
Mr Oigara’s salary rose 14 per cent to Sh65 million or Sh5.4 million per month in the year ended December 2017, according to the just published annual report.
His bonus was left unchanged at Sh147 million, in line with the bank’s flat net earnings of Sh19.7 billion in the period.
The KCB CEO’s allowances, however, more than tripled to Sh30 million while his gratuity increased 18 per cent to Sh13 million even as his non-cash benefits remained unchanged at Sh1 million.
KCB paid its chief financial officer, Lawrence Kimathi, a total of Sh59 million in the review period, after raising it 37 per cent from Sh43 million in 2016.
Mr Kimathi’s salary rose seven per cent to Sh29 million or Sh2.4 million per month while his bonus more than doubled to Sh23 million.
His non-cash benefit was retained at Sh1 million while his gratuity increased 20 per cent to Sh6 million.
While KCB and other listed companies are required to disclose the remuneration of their directors, it is not clear how far the pay disclosure should go.
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